A bad credit auto loan following your bankruptcy is one of best ways to get back in the credit game.
Who we are
At AutoNet Financial, we specialize in matching up customers with bad credit with dealers that specialize in bad credit car loans.
One of the questions we are asked most often is from customers who have experienced a bankruptcy and are wondering if they can finance a car. The fact is, a car loan is very possible after a bankruptcy and is a great way to reestablish your credit. But before you fill out an application, there are a couple of things that you need to know.
Chapter 7 and Chapter 13 bankruptcies
These are the two types of personal bankruptcies here in the U.S. a Chapter 7 bankruptcy and a Chapter 13 bankruptcy. A Chapter 7 bankruptcy (liquidation) is fairly short and is usually over in a matter of months. A Chapter 13 bankruptcy (repayment) can last either 3 or 5 years.
If you are currently in a Chapter 7 bankruptcy, you may want to wait until it has been discharged, although there are a number of lenders that will consider you if a discharge appears imminent (called pre-discharge).
If you are currently in a Chapter 13 bankruptcy, you will need to contact the Trustee assigned to your case and have him/her request an order to incur additional debt from the court (since a Chapter 13 bankruptcy is based on income and expenses, permission is needed from the court before any significant additional debt, such as a car, can be taken on). If the court approves the request, they will furnish you with the document. Make sure you have this document when you apply for a car loan, because it will be needed as proof that the court will allow a loan. The order also states the maximum amount the court will permit you to borrow.
Bankruptcy completions
There are two ways of completing a bankruptcy: it can either be dismissed or it can be discharged.
If you bankruptcy has been dismissed – and this is more common in Chapter 13 filings than in Chapter 7- it means that the person that filed the bankruptcy has ignored the court order by failing to make the required payments. If your bankruptcy has been dismissed, no subprime lender will give you a car loan.
If your bankruptcy has been discharged, it means that you have followed all the court’s guidelines and you have successfully completed your bankruptcy. At this time, the court will issue a letter of discharge. Keep this document, since you may need it as proof the bankruptcy has been completed (the credit bureaus may not have received the information yet, so the lender may require a copy of it).
Now it’s time to start rebuilding your credit.
Your credit report
First you’ll want to get a copy of your credit report from all three credit bureaus. You can go to www.annualcreditreport.com and request a free copy of your credit report from each of the three credit bureaus. You are entitled to one free copy from each bureau per year. You can also go to freecreditreports360.com and, for a small fee, receive all three credit reports at once plus your FICO scores from each bureau. Once you receive your reports, look them over and notify the individual bureaus through their dispute processes if you find any errors.
Reestablish your credit
There are two types of credit – revolving credit and installment credit. You need to re-establish yourself with both kinds.
An example of revolving credit would be a credit card. If you don’t qualify for a regular unsecured credit card, apply for a secured credit card where your credit limit is determined by funds you deposit in a bank account. Look for a company that will switch it over to an unsecured card in 12-18 months, provided you make all your account payments on time. It’s also a good idea to use only use 30% of your credit line.
A car loan is an example of installment credit. At AutoNet Financial, we have helped thousands of people that have gone through a bankruptcy get their car credit re-established with a bad credit car loan. Simply go to our site at www.autonetfinancial.com to begin the process.
The Bottom Line
Even if you’ve gone through bankruptcy, you can still qualify for a car loan. By visiting our web site at www.autonetfinancial.com, you can begin the process of rebuilding your car credit and raising your credit score where you’ll be “on the road” to better credit before you know it!
